Vedanta Resources — Deutsche Bank Access Metals and Mining Conference 2016
31 slides from Vedanta Resources's conference presentation, Sep 14, 2016
Slide 1: Vedanta Resources Plc
Vedanta Resources Plc Deutsche Bank Access Metals and Mining Conference Tom Albanese Chief Executive Officer September 2016
Slide 2: Cautionary Statement and Disclaimer
Cautionary Statement and Disclaimer The views expressed here may contain information derived from statements. We do not undertake to update our forward-looking publicly available sources that have not been independently verified. statements. We caution you that reliance on any forward-looking statem
Slide 3: Safety and Sustainability
Safety and Sustainability Safety Fatal Incidents 1 fatality in Q1 FY2017 20 19 Focus on bringing in a culture of Zero-Harm Environmental Management 12 Zero “higher category” (Cat 4 & 5) environmental incidents in FY2016 8 Safe and successful closure of the Lisheen mine in FY2016 Focus on resources e
Slide 4: Commodity prices driven by dollar strength, low interest rates and China recovery
Commodity prices have been driven by dollar strength, low interest rates and recovery in China Dollar strength vs commodities US interest rates vs commodities 3000 102 3000 1.2 100 2800 2800 1.0 98 0.8 2600 96 2600 94 0.6 2400 92 2400 0.4 90 2200 2200 0.2 88 2000 86 2000 0.0 Jan-15 May-15 Oct-15 Mar
Slide 5: Vedanta: A Global Diversified Natural Resources Group
Vedanta: A Global Diversified Natural Resources Group • Portfolio of large, structurally low-cost, long-life Tier-I assets, that EBITDA Mix for Q1 FY2017 delivered strong free cash flow – Significant ramp-up at Aluminium, Power and Iron ore 10% progressing well with minimal incremental capex 13% 37%
Slide 6: Zinc and Silver: Fundamentals supporting performance
Zinc and Silver: Fundamentals supporting performance CY2016 Global Zinc Cost curve Refined Zinc inventory (mt) at 6 year low US$/t 1.8 2,800 2,000 1.5 2,500 Zinc Intl 1,700 Hindustan Zinc 1.2 2,200 1,400 0.9 1,900 1,100 0.6 1,600 800 0.3 1,300 500 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0.0 1,00
Slide 7: Zinc India: Well-positioned to reap benefits of strong fundamentals
Zinc India: Well-positioned to reap benefits of strong fundamentals Zinc India Rampura Agucha Mine – Longitude Vertical Section Projects RAM U/G main shaft crossed 900mtrs against the final depth of 950mtrs; winder erection work commenced during the quarter Extension of RAM open pit: Pre-stripping p
Slide 8: Zinc International: First ore production in early CY 2018 at Gamsberg
Zinc International: First ore production in early CY 2018 at Gamsberg Gamsberg Project update Project timeline Large, low-cost project with long mine life Targeting zinc production of 250ktpa in Phase-1 Feasibility Full − Construction Ramp-up Study production − Significant potential for further expa
Slide 9: Aluminium: Strong ramp-up underway
Aluminium: Strong ramp-up underway Q1 FY2017 Results Aluminium Costs and Margins (in $/t, for Q1 FY2017) Record quarterly production at 244kt Q4’16 1,516 134 65 1,705 (554) (570) (307) (61) $223/t Ramp-up at BALCO II 325kt smelter completed Jharsuguda-II: 1st line ramp-up impacted by a power outage
Slide 10: Copper – Zambia: Turnaround underway
Copper – Zambia: Turnaround underway Q1 FY2017 Results Top 25 producing copper mines by contained copper (mt) Integrated production in line with guidance 23% increase in production at Konkola in FY2016 160 − Shaft 1 & 4 rehabilitation completed in Q1 & Q4 FY2016 140 respectively Contained Cu in R&R
Slide 11: Copper – Zambia (contd.)
Copper – Zambia (contd.) Regulatory Update Volumes (kt) Mineral Royalty Tax linked to copper LME prices formalised and effective from 1 June 2016 Konkola Nchanga TLP Custom Power crisis continues in Zambia − Government revised the tariff upwards by 29% for 70% power consumption in Jan 2016 190-220 −
Slide 12: Continued Focus on Strong FCF Generation Through Disciplined Ramp-up
Continued Focus on Strong FCF Generation Through Disciplined Ramp-up Presented at FY2016 results Progress in FY2017 Copper Eq. Production − Ramp-up of BALCO-II smelter completed, EBITDA $3.7 $2.3 +30% rolled product facility bn bn growth $1.5 $0.6 $1.0 re-started; Capex bn bn bn Strong free cash flo
Slide 13: Financial Profile
Financial Profile Strong liquidity with cash of $7.7bn, and undrawn committed facilities of $1.1bn as of 30 June 2016 FY2017 bond maturities at Vedanta Plc paid; focused on future maturities HZL paid special dividend of $1.8 billion in April Gross Debt reduced by $700mn in last 5 quarters Vedanta Li
Slide 14: Vedanta Resources: An attractive value proposition
Vedanta Resources: An attractive value proposition 30% High growth Low multiple 2 Year EBITDA CAGR2 20% Vedanta Peer 6 Peer 7 Peer 4 10% Peer 3 Peer 2 Peer 5 0% Peer 1 Low growth High multiple -10% 5.0 6.0 7.0 8.0 9.0 EV/EBITDA (EBITDA for CY 2017) Vedanta trades at an attractive multiple, while off
Slide 15: Strategic Priorities Remain Unchanged
Strategic Priorities Remain Unchanged Strategic Priorities Focus Areas for FY 2017 • Disciplined ramp-up of new capacities in Aluminium, Power and Iron Ore Production growth and asset • Zinc: Ramp-up volumes at Rampura Agucha U/G and develop optimisation Gamsberg • O&G: Enhance gas production; EOR a
Slide 16: Appendix
2S vedanta Appendix
Slide 17: Vedanta Ltd. – Cairn India merger: Transaction timetable
Vedanta Ltd. – Cairn India merger: Transaction timetable Key Event Expected date BSE, NSE and SEBI approvals sought Completed BSE, NSE and SEBI approvals Completed Application to High Court in India Completed Vedanta plc posting of UK Circular Completed Vedanta plc EGM Completed Vedanta Limited shar
Slide 18: Large, low cost and diversified asset base
Large, low cost and diversified asset base FY2016 R&R Life EBITDA (years) Production ($mn) Key highlights • India’s largest private-sector crude oil producer 46.9 Oil & Gas 15+ 1 570 • Strong FCF generation even at low oil prices with opex of mmboe $6.5/bbl 2 • Positioned on the 1st decile of the co
Slide 19: Oil & Gas: Low-cost producer with growth optionality
Oil & Gas: Low-cost producer with growth optionality Q1 FY2017 Results Mangala EOR, world’s largest polymer program yielding results − EOR production reached 42 kboepd, 31% higher q-o-q − Rajasthan production stable at 167 kboepd in Q1 Rajasthan water flood opex further reduced to $4.4/boe; blended
Slide 20: Power: 9GW portfolio operational
Power: 9GW portfolio operational Q1 FY2017 Results Power Generation Capacity – c. 9GW 1980 MW TSPL: Unit-I and Unit-II operated at an availability of CPP:5.1GW IPP: 3.6GW 72% in Q1 • 1,215MW Jharsuguda • 600MW Jharsuguda • 3x600MW Jharsuguda (of − Unit-III put to commercial production in August and
Slide 21: Iron Ore and Copper: Strong cost positions
Iron Ore and Copper: Strong cost positions Iron ore: Steady production at Goa Copper Cathodes: Goa production ramped up in Q1, run rate of 0.8 mt per month Strong performance in Q1, spot Tc/Rc remains robust Karnataka 0.8 mt production FY2017 expected production at 400kt Engaging with the respective
Slide 22: Debt Profile
Debt Profile Diversified Funding Sources for Term Debt (as of 31 March 2016) 9% 26% Bonds - USD Bonds - INR Convertible Bonds - USD 33% Term Loan - INR 11% Term Loan - USD Short Term Loans 18% 4% 48% of the debt is fixed interest rate, 52% floating rate 63% of the debt is USD-denominated, 37% is INR
Slide 23: Segment-wise summary
Segment-wise summary Oil & Gas FY2015 FY2016 Zinc-India FY2015 FY2016 Average Daily Gross Operated Mined Metal (kt) 887 889 Production (boepd) 211,671 203,703 Refined Zinc – Integrated (kt) 721 759 Rajasthan 175,144 169,609 Refined Lead – Integrated (kt)1 105 140 Ravva 25,989 23,845 Saleable Silver
Slide 24: Segment-wise summary (contd.)
Segment-wise summary (contd.) Copper-Zambia FY 2015 FY 2016 Aluminium FY2015 FY2016 Mined Metal (kt) 116 123 Aluminium Production (kt) 877 923 Finished Metal – Total (kt) 169 182 Jharsuguda I - 500kt 534 516 Integrated (kt) 117 117 Jharsuguda II - 1,250kt1 19 76 Custom Smelting (kt) 52 64 Korba-I 24
Slide 25: Segment-wise summary (contd.)
Segment-wise summary (contd.) Power FY2015 FY2016 Iron Ore and Pig Iron FY2015 FY2016 Power Sales (million units) 9,859 12,121 Sales (mt) 1.2 5.3 Jharsuguda 2,400MW 7,206 7,319 Goa¹ - 2.2 BALCO 270MW 89 169 Karnataka 1.2 3.1 BALCO 600MW 10 1,025 Production 0.6 5.2 MALCO 897 402 Goa - 2.2 Talwandi Sa
Slide 26: Entity Wise Cash and Debt
Entity Wise Cash and Debt Net Debt Summary ($mn) 31 Mar 2015 30 Sept 2015 31 Mar 2016 Company Debt Cash & LI Net Debt Debt Cash & LI Net Debt Debt Cash & LI Net Debt Vedanta plc1 7,707 34 7,673 8,053 17 8,036 7,364 30 7,334 KCM 802 65 738 728 38 690 659 33 626 Vedanta Ltd. Standalone 4,574 135 4,439
Slide 27: Inter-company Debt
Inter-company Debt Debt Service Liability (in $mn) FY2016 Vedanta Resources plc 30 Sept 2015 31 Mar 2016 Interest Cost Gross External Debt 8,216 7,507 505 Intercompany Receivable at Plc from Vedanta Ltd (2,611) (1,867) (177) Debt Service Liability 5,605 5,640 328 FY2016 Vedanta Ltd. 30 Sept 2015 31
Slide 28: Credit Metrics
Credit Metrics Covenant FY2015 FY2016 (Up to March 2017) Net Debt/EBITDA 2.27x 3.14x < 4.0x EBITDA/Net Interest Expense1 6.78x 3.86x > 2.5x Net Assets/Debt 1.91x 1.55x > 1.4x Gearing2 40.8% 51.7% Gearing – pre-impairment2 33.5% 33.3% Several of our facilities have the covenants of Net Debt/EBITDA of
Slide 29: Currency and Commodity Sensitivities
Currency and Commodity Sensitivities Foreign Currency - Impact of a 10% depreciation in FX Rate FY2016 FY2016 Currency Average FX rate EBITDA ($mn) INR/USD 65.4611 207.6 Commodity prices – Impact of a 10% increase in Commodity Prices FY2016 FY2016 Commodity Average price EBITDA ($mn) Oil ($/bbl) 47
Slide 30: Project Capex
Project Capex Capex Spent up to Spent in Unspent as at Capex in Progress Status (US$mn) March 2015 FY2016 31 Mar 2016 Cairn India Flexibility in capex based on oil prices 1,378 1,080 198 100 Total Capex in Progress - Oil & Gas 1,378 1,080 198 100 Aluminium Sector Smelter: 84 pots capitalised in Sep
Slide 31: Group Structure
Group Structure Vedanta Resources Plc Divisions of Vedanta Limited 79.4% 62.9% Sesa Iron Ore Konkola Sterlite Copper (Tuticorin) Copper Vedanta Ltd Power (2,400 MW Jharsuguda) Mines (KCM) Aluminium (Odisha aluminium and power assets) Subsidiaries of Vedanta Ltd 59.9% 64.9% 51% 100% 100% 100% 100% 10
Vedanta Resources — Deutsche Bank Access Metals and Mining Conference 2016 on 6ix